Shrinking Japan puts pressure on central bank
Falls in consumer spending and overseas sales in the third quarter cause more woe for central bank as analysts see more declines to come
Japan's economy shrank last quarter as exports tumbled and consumer spending slumped, putting pressure on the central bank to add stimulus and hurting Prime Minister Yoshihiko Noda's record as he prepares for elections.
Gross domestic product fell an annualised 3.5 per cent, the most since the earthquake and tsunami last year, Cabinet Office data showed yesterday. Shipments to Asia, Europe and the United States all slid, as did capital spending.
With analysts also seeing a GDP decline this quarter, according to a survey last week, Japan faces the risk of its third textbook-definition recession since 2008. The deterioration may undermine plans by Noda to implement the nation's first sales-tax rise in more than a decade, and raises the stakes of a political impasse that has left the government running out of cash.
"[The] bad economic numbers deliver unpleasant news for Noda," said Hiroshi Shiraishi, senior economist at BNP Paribas, who accurately forecast the GDP figure.
"It will take a while for Japan to get back to a sound recovery, considering a modest pick-up in the global economy at best and the country's damaged relationship with China."
Exports to China have been undermined by anti-Japanese sentiment in the aftermath of the Noda administration's purchase from a private owner of islands that China also claims.
The yen was little changed at 79.51 per US dollar in Tokyo. The Nikkei-225 Index, which is down about 15 per cent from this year's high in March, fell 0.93 per cent to 8,876.44 points.